DPRU
WORKING PAPERS
The Present as a Legacy of the Past:
The Labour Market, Inequality and Poverty in
South Africa
Servaas van der Berg and Haroon Bhorat
No 01/29
ISBN: 0-7992-1972-X
August 1999
Development Policy Research Unit
University of Cape Town
THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
1. Introduction
South Africa is an upper middle-income country with social indicators suggesting living standards closer
though to those of lower-middle income or even low-income countries. This difference between its economic
status and social development can largely be ascribed to high levels of material inequality that have left
inordinately large numbers of people outside the economic mainstream. This implies that the society is highly
inefficient in converting economic resources into social welfare. As is well known, the cause of this lies mainly
in the long history of segregation and discrimination that has left a legacy of inequality and poverty and also,
in more recent decades, low economic growth.
This paper is part of a larger research project, funded by the African Economic Research Consortium
(AERC), that looks at poverty in South Africa mainly through the lens of the labour market. In order to
understand present-day inequalities and how these are reflected in poverty, it is necessary to analyse the main
forces that generated present socio-economic outcomes. Understanding the factors at work can also
contribute to an understanding of the constraints on and possibilities for redistribution. Thus this paper acts as
an introduction for the whole research project.
The next Section will provide a brief decomposition of possible sources of inequality, before we
investigate the historical origins of this inequality and trends in inequality and in fiscal incidence in Sections 3
to 5. Section 6 provides a very brief overview of policy developments and Section 7 of present household
poverty and labour market inequalities, while Section 8 is the conclusion.
2. Sources of inequality: A decomposition of the sources of material welfare
It is useful for such an analysis to start with the labour market as the major area of inequality. In terms of the
labour market, remuneration is determined as the product of employment and wages, i.e. any analysis would
have to deal with both access to employment, and the remuneration attached to such employment (hereafter
referred to as wages).
But not all incomes are from remuneration. Non-remuneration income consists of income from the other
factors of production (land rent, interest on capital, profits on entrepreneurship) as well as transfer incomes.
Transfer incomes, because of their origin mainly as social assistance provided by the state, are a special case
that will better be dealt with as part of fiscal issues. Thus the other sources of non-remuneration income can
be divided between those that are a return to assets or wealth (land rent and returns to capital), and
entrepreneurial income.
Formally, for any racial or other group, or any household,
Y = Yw + Yn
(eq.1)
= W.E + Yn
(eq.2)
where
Y refers to the personal incomes,
Yw to the portion accruing as remuneration incomes,
Yn to the non-remuneration part of personal income,
W to average remuneration rates, and
E to the number of people in formal employment, i.e. receiving remuneration.
Expressed in per capita terms, where population is P:
Y/P = W (E/P) + Yn/P
(eq.3)
Thus shifts in the per capita income of a group, given its population, can be ascribed to one of three
possible factors:
•
changes in wage levels in the formal economy,
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DPRU WORKING PAPER
•
changes in employment relative to population1, and
•
changes in non-remuneration income, mainly income from property or entrepreneurship (e.g. profits,
dividends, interest receipts, farming income and income from informal businesses), as well as transfers.
As non-remuneration income is relatively slow to change, shifts in distribution are usually driven by either
wage shifts or employment shifts, as will be discussed in Section 4.
Another source of material inequality lies in the fiscal incidence of government activities, both in terms of
taxation and in terms of public spending, particularly social spending. Discriminatory budgets in South Africa
have long been a corollary of apartheid and will be dealt with in some detail.
It is common to assume that welfare is a function of consumption.
U = f(C)
(eq.4)
However, welfare can more properly be seen as a function of so-called secondary income (Bromberger
1982) or command over resources, which is determined as primary or personal income minus direct taxation
(i.e. disposable income) plus the value of public services consumed, i.e.
U = U(Ys)
= U(Yp – Td + G)
(eq.5)
where
Ys = secondary income
Yp = primary income
Td = personal income taxes, and
G = government spending/consumption of government services.
Many public spending benefits are impossible to assign to households, for instance, defence or police
spending. The only major spending category that can be assigned with any degree of certainty is social
spending, where the beneficiaries are in principle determinable. If this course is followed and other public
expenditures are ignored, equation 2 above becomes
U = U(Ys)
= U(Yp – Td + Gs)
(eq.6)
where
Gs = social expenditure2.
Thus, for any group, material welfare can be regarded as the sum of remuneration plus non-remuneration
income, minus personal taxes plus social spending, i.e.
U = U(Yp – Td + Gs)
=U(Yw + Yn - Td + Gs)
(eq.7)
where Yw = remuneration income,
Yn = other (non-remuneration) income.
For any group, remuneration, in turn, is the product of wage and employment (eq.2 above), thus
U = U(W.E + Yn - Td + Gs)
(eq.8)
If we are interested in welfare of any particular group in per capita terms, the focus should thus be on
•
average wage levels for that group
•
employment per capita
•
non-remuneration income per capita
1
Note that this differs somewhat from the conventional focus on employment and unemployment relative to the
labour force. In a purely short-term or static analysis, this difference may not seem very pertinent, but it
emphasises the role of differential labour force participation rates between groups and over time.
2
As social spending includes social transfers, which are already counted in personal incomes, adjustments should
be made to avoid double counting, by excluding social transfers from either primary income or social spending.
2
THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
•
personal income taxes per capita, and
•
social spending per capita.
Given this starting point, it is appropriate to analyse the historical origin and trends of these various
sources of material inequality to better understand present poverty and inequality. This will be done in
Sections 3 to 5 below. From this analysis it will become clear why the focus in the broader research of which
this study forms part falls on the labour force and not so much on other sources of inequality.
3. Origins of poverty and inequality in the South African labour market
Over the last one hundred years, political influences on the South African labour market were characterised
by a plethora of legislation that was instrumental in maintaining, until the early 1970s, a workforce strictly
divided on the basis of race3. Though particular economic interests provided the incentives for such labour
market interventions, economic forces also often highlighted the inappropriateness of a racially constituted
labour market. While in the early twentieth century the economy seemed to thrive on a divided workforce,
industrialisation and the need for more skills meant that a segregated labour market would later become a
hindrance to economic progress.
3.1 The mineral discoveries of the 1860s and 1880s
The discovery of diamonds in the 1860s and gold in the 1880s transformed South Africa from a closed,
agrarian economy to one able to start out on a path of industrialisation and establish international economic
linkages. The mining industry required a large, mass-based workforce. This was accomplished by coaxing
black peasants to the mines and applying coercive methods such as the Glen Grey Act of 1894, which
imposed a tax on all Africans who did not enter the mines on a three month contract (Ncube 1985: 14). To
augment this labour tax, poll and hut taxes were imposed on the African rural population, thus increasing the
incentive to earn cash on the mines. Through such legislative interventions, the mines came to rely on a cheap
and steady supply of African labour from the rural areas.
3.2 1910-1922: Union and the origins of a discriminatory labour market
The Union of South Africa represented a political partnership between English-speaking and Afrikaner whites
(representing at that time the mining and agricultural interests respectively) and excluded the African majority
from any formal political expression (Terreblanche & Nattrass 1990:6). This minority government passed a
series of laws that would deleteriously impact on the smooth functioning of the labour market:
•
The Mines and Works Act essentially reserved skilled jobs on the mines for whites and thereby prevented
the upward mobility of Africans on the mines.
•
The Black Labour Regulation Act instituted a standard uniform wage rate for African mine workers and
prevented African workers from breaking their employment contracts. This was buttressed by a provision
which prevented employers from attracting workers through higher wages (Greenberg 1980:154).
•
The 1913 Land Act forbade Africans from owning land in designated 'white' areas and resigned Africans to
'reserves' which accounted for 7% (later 13%) of the total land area of South Africa. The Land Act also
limited the number of African families that could live on white farms, thereby forcing many African
peasants out of farming and into wage labour.
3
For the purposes of the study, we use the race classification system, where the society is divided into four
groups, namely African, coloured, Asian and white. African, coloured and Asian individuals are collectively
referred to here as blacks.
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DPRU WORKING PAPER
•
The pass laws curtailed the free flow of African labour and served as an auxiliary weapon in the migrant
labour system, forcing many workers to take whatever jobs were available, thus weakening their
bargaining power and trapping many in low-wage sectors such as agriculture and domestic services
(Ncube 1985:17).
Securing a steady supply of labour for the mines was the responsibility of the Witwatersrand Native
Labour Association (WNLA), which sought to hire labour from Southern Africa, and the Native Recruiting
Corporation (NRC), which was set the task of domestic recruitment. This control exercised over the supply of
mine labour has led to this sector being characterised as an example of a 'collaborative monopsony' wherein
mining interests colluded to ensure a stable, predictable flow of labour from rural areas to the fast growing
industry (Marks & Rathbone 1982:88).
As a result, the labour market in this period was characterised by a growing number of migrant workers.
Furthermore, an overlap between occupation and race developed, i.e. a racial division of labour, that would
be carried into other sectors of the economy in the process of industrialisation, and would persist for decades.
3.3 1922-1933: The Pact government’s repressive labour policies
On the mines, almost equally poor white workers competed with Africans for jobs. Whereas African workers
usually had a second source of subsistence in tribal agriculture, white mineworkers were more fully
proletarianised. When the mines in the early 1920s started replacing white workers by lower paid Africans to
reduce costs in the face of falling mine incomes, it culminated in a bloody conflict between white
mineworkers and state forces. This 'Rand Revolt' had significant political and economic ramifications. One
outcome was the passing of the Industrial Conciliation Act in 1924, that provided a legal framework for
collective bargaining between workers and management. But by specifically excluding African employees
from the provisions of this framework, it laid the basis for a racially discriminatory labour market, the legacy of
which is still present in the labour market today.
The government response to the strike contributed to an electoral pact between the National and Labour
Parties, an alliance between Afrikaner nationalists and English-speaking socialists, and played an important part
in their electoral victory in 1924. Given its constituency of white farmers and white workers, the Pact
government aimed to improve the position of agriculture, stimulate domestic industry to reduce the
dominance of mining, improve the position of white workers, and address the poor white problem. Its
economic policies included five sets of measures that were to have a lasting influence on South African
economic development for at least half a century:
•
The system of agricultural co-operatives
•
The agricultural marketing boards and the system of controlled marketing this gave rise to
•
Tariff protection to stimulate domestic industry at the expense of imports
•
A major role for the state as industrial entrepreneur through state corporations such as ISCOR
•
Protection of white workers against black competition by the "civilised labour" policy.
In the industrial sphere, tariff protection remarkably stimulated domestic industry and employment. In the
five decades following the electoral victory of the Pact government (spanning the Great Depression),
manufacturing employment expanded tenfold, i.e. at almost 5% per year (SA Statistics 1988: 12.6). As a
consequence, more black workers were drawn into the urban workforce as unskilled labourers in the growing
manufacturing industry. African manufacturing employment grew by one-third from 46 813 in 1916 to 69 830
in 1928, rising from 35% to 43% of total manufacturing employment. (South Africa, 1960)
Yet industrial expansion behind tariff barriers was combined with repressive labour measures that ensured
that the fruits of this growth were inequitably distributed. The 1925 Wage Act extended the ‘civilised labour
policy’ by further protecting remuneration to whites and ensuring a minimum wage payable to white
employees (Saldru 1989). This policy also included job reservation that confined certain skilled occupations to
4
THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
whites, excluded Africans from the provisions of the Industrial Conciliation Act, and offered tariff protection
only to those domestic industries employing a large enough proportion of "civilised" workers. The 1926 Mines
and Works Act further entrenched job reservation on the mines by excluding Africans from all skilled and
semi-skilled positions on the mines (Ncube 1985:38). For ‘poor whites’, the state provided sheltered
employment in the newly formed parastatals or on the national public works programme.
The effect of these measures was reflected in relative wage movements. After 1924, the relative power of
white mineworkers enabled them to increase their wages steadily and far in excess of the inflation rate. In
contrast, the mines, constrained by a fixed gold price, a fixed exchange rate and limited possibilities for
technological or productivity improvement, persisted in paying very low wages for African mineworkers, who
had little economic power and were excluded from skilled jobs. Consequently, in 1970 the average African
mineworker’s real wage was no greater than in 1890. Thus the racial wage gap in mining kept on widening
from 1924 to 1970.
Even within this hostile environment, some black workers did manage to organise themselves formally.
The most visible expression of the black trade union movement in this period was the Industrial and
Commercial Workers Union (I.C.U.) that came to the fore in the 1920s under Clements Kadalie and at its
height boasted 100 000 members, primarily farm workers (Stadler 1987:144). The state and employers
refused to recognise the union and the SA Trade Union Congress, the biggest trade-union federation at the
time, denied membership to the ICU. Under the strain of high expectations of employees, rising corruption
and internal disputes, the ICU had dissolved by the early 1930s.
3.4 1933-1948: An easing of labour market segregation
The Great Depression was ended in South Africa by the movement off the Gold Standard in 1933 and the
devaluation of the South African pound. The growth of manufacturing continued in this era, stimulated by the
isolation of World War II and attempts to produce for the war effort. In the period 1940 -1946, gross
manufacturing output rose by 51% and for the first time surpassed that of agriculture, though still falling
behind mining.
The expansion of manufacturing generated a renewed impetus for urbanisation. African urbanisation had
been managed since the Stallard Commission of 1922. Stallardism advocated the spatial separation of races,
where Africans would reside in rural areas and only work in urban areas when required by whites. The
strategy placed legislative controls on the movement of African labour into the cities via influx control, and
secondly, for those African workers who did reside in urban areas, there was scant provision of housing and
services. The Stallard principle is best encapsulated in the well known phrase, that Africans in urban areas
were required to:
"’..minister to the needs of the white man and should depart therefrom when (they) had ceased so
to minister.’" (Stadler 1987:88)
By the 1940s, urbanisation was becoming increasingly difficult to control. The African urbanisation rate
increased from 12.6% in 1911 to 23.7% in 1946. The Fagan Commission, appointed in 1946 to investigate
urbanisation, concluded that African urbanisation should be viewed as a natural outcome of industrialisation
that should be regulated but not prevented (Terreblanche & Nattrass 1990:11). It recommended
improvements in housing provision, a common identity document for all races, and in the long term the
possibility of non-racial urban areas.
Gradual upward mobility of blacks into semi-skilled occupations slowly narrowed the inter-racial wage gap
in manufacturing in this period, as Table 1 shows. While the average African wage in manufacturing and
construction was less than 20% of the level of the white wage in 1939/40, before the end of World War II
this had risen to 24%, despite the fact that white wages also rose steadily. Real wages for African workers
increased by almost 68% from 1929 to 1945, compared to a 37% increase for white workers.
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DPRU WORKING PAPER
Table 1: Average real wages in manufacturing and construction by race (in 1970 Rand per worker)
Year
1929/30
1935/36
1939/40
1944/45
White
African
R1 258
R1 413
R1 418
R1 726
R247
R263
R278
R414
Wage ratio
(African as % of white level)
19.6%
18.6%
19.6%
24.0%
Source: Lipton 1986:409
The black trade union movement was revived in this era. For example, the Council of Non-European Trade
Unions came to the fore, and in 1941, the African Mine Workers Union (AMWU) was formed (Webster
1986:16). The growing militancy of black miners led to the 1946 black miners' strike that affected almost half
of the mines, stopped production on at least twelve mines and involved approximately 76 000 workers
(Greenberg 1980:157). As a consequence, the number of workdays lost in production rose dramatically from
91 180 in 1945, to 209 350 in 1946 and to 1 378 063 the following year. Although the strike was eventually
squashed by the government, it represented the first serious challenge by black workers to the existing
industrial relations system and to wages and working conditions in mining.
Other reforms mooted in this period included the abolition of the pass system and the recognition of
African trade unions. In concurring with the Fagan Commission, the Department of Native Affairs suggested
that influx control be abolished. To this end regulations on the flow of African labour were relaxed and the
number of prosecutions for pass law violations fell (Lipton 1986: 22).
The recommendations of the Fagan Commission meant that Africans would be competing for the same
jobs as poor whites and would be able to undercut unskilled white workers. Occupational mobility of Africans
in the manufacturing sector also increased pressures on whites in semi-skilled occupations. Together with the
spectre of a large organised black workforce manifest in the strike of 1946, this exacerbated existing tensions
between Afrikaner nationalists and the ruling United Party. The 1948 election was won by a Nationalist Party
that was able to appeal to the economic fears and nationalist sentiments of Afrikaners under the banner of
apartheid. The marginal gains attained in the labour market under Smuts’s United Party, were to be viciously
reversed in the subsequent period.
3.5 1948-1973: The apartheid labour market
Political apartheid became institutionalised after 1948 and eventually operated at three levels. At the macro
level, "grand apartheid" tried to create black nation-states and to give these economic content by
development of the homelands and the policy of industrial decentralisation. At the intermediate or meso level,
apartheid emphasised separation between race groups ("own community life") through influx control, urban
settlement patterns (Group Areas), population removals, separate schools, and so on. At the micro level,
"petty apartheid" emphasised separation between individuals of different race groups through separate
amenities (e.g. parks, sports fields, etc.), prohibition of interracial marriages and sexual relations, etc. While
macro level apartheid was fiscally the most costly, meso level apartheid measures probably had a greater
detrimental economic impact through their labour market effects. As long as the economy was still relatively
underdeveloped, inward looking and expanding rapidly, the costs of these measures could be borne with
ease, but these costs grew with time, especially once the economic boom of the 1960s had ended.
The government aggressively promoted the employment of whites in state controlled enterprises and in
the burgeoning bureaucracy, revitalised public relief programmes to ensure short term employment for
whites, gave assistance to Afrikaner business, and supported commercial (white) agriculture through a variety
of measures.
The onslaught on the black population is now well documented, and it is here only necessary to discuss
briefly some of the policies that specifically affected the labour market. One of the first actions of the new
government was to overturn the Fagan Report. The Sauer Commission witnessed a reversion to the Stallard
6
THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
principle of labour control (Lipton 1986:22). Indeed, a striking feature of this period was the energy put into
reaffirming and tightening up influx control. Labour Bureaux were established, through the 1968 Bantu Labour
Regulation Act, to control the movement of such labour. Pass law related arrests reached 700 000 in 1968
(Lipton 1986:35), which constituted approximately one arrest for every twenty economically active Africans.
Although the National Party altered influx control and increased its complexity, it was essentially a reversion to
past policies. But as South Africa was by then a much more industrialised country than when Stallardism was
first imposed, it was much more in conflict with labour market needs.
The Bantu Labour (Settlements of Disputes) Act of 1953 tightened the exclusion of Africans from the
industrial relations system by barring African workers from registered unions and forbidding strikes by African
employees (Greenberg 1980:160). Instead African workers were provided a separate system of 'works' and
'liaison' committees within which management and African workers were meant to negotiate terms of
employment (Lipton 1986:27).
The upward mobility of black workers was halted by a series of complementary legislation. The Industrial
Conciliation Act of 1956, for example, assured the maintenance of the racial division of labour and
significantly widened the ambit of the 'civilised labour ' policy to all sectors. In reaction to employer resistance,
a 1959 amendment to the Act assured that the state could overrule an Industrial Council agreement, thus
giving the state almost complete control over the hiring practices of private sector employers. White workers
were given preference in the public sector and in many cases black labour was substituted by white labour
(Lipton 1986:24). In government services, for example, African employment fell by 12% between 1946 and
1951.
As an auxiliary to job reservation, the 1953 Bantu Education Act required that African education be largely
self-funded, thus tying expenditure on African education to revenue earned in the form of taxes from Africans
(Bromberger 1982). In the early years of National Party rule, expenditure on African education fell in per
capita terms, and it declined from 13% of white levels in 1953 to only 10% in 1961 (SAIRR 1961).
Thus African school-leavers entered the labour market at a severe disadvantage. At the point of entry to
jobs, further discrimination was evident in the form of a 'civilised labour' policy that gave first preference to
white workers. If Africans were able to gain entry into a job their mobility was curtailed and their bargaining
power reduced through constraints on trade union activity. Thus from pre-employment to employment,
African workers faced legislation that sought to undermine their ability to accumulate human capital, to
increase their wages, to gather relevant job experience, and to negotiate for better wages and working
conditions.
While industrial expansion during the Second World War had improved the relative wage of blacks, the
end of the war and National Party rule shifted economic power back to white workers. Thus the African to
white wage ratio returned to its pre-war level by 1960. In the high-growth era of the 1960s, it was even to
deteriorate somewhat (as shown later in Table 2b), as whites were the main beneficiaries of the expanding
need for skills created by the economic boom.
In the midst of these dramatic changes, the South African economy experienced a decade of
unprecedented growth. Economic growth in the period 1961 to 1970 exceeded 5%. Large capital inflows, a
high gold price and abundant cheap labour sustained these golden years of the apartheid economy.
The boom period created a greater demand for skilled labour, thus the state resorted to encouraging
immigration, upgrading the skills of employed whites and also enticing women into the labour market (Lipton
1986: 33-34). It nevertheless became increasingly difficult to rely solely on a small base of white employees.
The state responded by allowing the colour bar to become de facto a 'floating bar'. This involved the
reclassification of jobs to allow blacks to be trained in the less skilled components of 'white jobs'. Racial
divisions were still strictly adhered to, as no black worker could supervise a white employee (Lipton 1986:33).
In addition, skilled work for blacks was limited, particularly where it competed with whites. The mobility
allowed by the government was constrained as it sought to maintain the rigid overlap between race and
occupation (Lipton 1986:33).
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DPRU WORKING PAPER
Thus the windfall economic gains of the 1960s heightened the tension between legislative provisions in
the labour market and the economy's need for a wider skills base. The state's response was an attempt to
institute concessions within the broader realm of an apartheid labour market, an approach whose bankruptcy
was to become more apparent in the following two decades.
3.6 1973-1990: The origins of the post-apartheid labour market
The first oil shock began an era of prolonged recession and a structural crisis from which the South African
economy is still trying to recover. Economic growth rates were below population growth for most of this
period, and per capita income declined by 15% from 1974 to 1993.
Politically, during this period the National Party resorted to increasingly desperate measures to maintain
power as resistance to apartheid grew. Its policy responses vacillated between oppression and reform, as
reflected in, e.g., the 'total onslaught' strategy, half-hearted attempts at political reform as encapsulated in the
tricameral parliament, and more fundamental labour and urbanisation policy reforms (discussed below).
Explosive examples of the clash between oppression and resistance include the 1976 Soweto uprising and
numerous struggles by communities in the 1980s. Faced with a chronic crisis, a hostile international
community and the obvious anachronism of apartheid, political reforms ensued in 1990, resulting in a
democratically elected government in April 1994.
In the labour market, perhaps the most important events of this period were the 1973 wild cat strikes,
which were as spontaneous as they were widespread. It forced both government and employers to rethink
their industrial relations strategies. Their responses were embodied in the Wiehahn and Riekert Commissions
of 1979.
The Wiehahn Commission recommended the legalisation of black trade unions and the scrapping of job
reservation. This led to the Industrial Conciliation Amendment Act of 1979, which widened the definition of
an employee to include African workers, although migrant workers initially remained excluded and the Act
still barred non-racial trade unions (this provision was to be omitted two years later) (Saldru 1991). Notably
also, agricultural and domestic workers remained excluded from the ambit of the 1979 Act. One of the results
of these reforms was a more than threefold growth in trade union membership, from 701 758 in 1979 to 2
458 712 in 1990. Thus the upshot of the Wiehahn Commission was a black workforce with greater
bargaining power and increasingly drawn into the regulated labour market, where they were now covered by
legislation on minimum conditions of employment.
The Riekert Commission investigated the issue of African labour mobility. It argued for the relaxation of
controls on workers who held rights of urban residence or employment, to allow for a freer flow of labour to
the cities. Given the mining industry's increased reliance on local labour and pressure from the manufacturing
industry for a stable workforce, influx control was abolished in 1986. This eradicated one of the last pillars of
the apartheid labour market.
3.6.1. Wage and income inequality
Between the Second World War and the late 1960s, African wages across all sectors had remained fairly
stagnant. However, from the 1970s onwards, wages rose rapidly for all groups but whites. Indeed, this rise in
wages is considered to be one of the most important factors explaining the change in income distribution
patterns over the last twenty years, and its cause can to a large extent be found in an important shift in relative
economic power.
In mining, there was a dramatic turnaround in trends in the racial wage gap, which had widened
consistently until the early 1970s, but then started narrowing from both sides as African real wages rose
startlingly in the 1970s, while white wages often lagged behind inflation (Table 2a). Black wages in mining
were only 6% of white wages in 1960, but by 1985 this figure had risen to 19% (Table 2b). Indeed, from
8
THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
1972 to 1980, mean African wages in mining increased almost threefold (by 184%). In manufacturing and
construction, too, the wage gap narrowed considerably, if not as spectacularly. The major causes of these
changing wage trends of the 1970s and beyond were the increased bargaining power of particularly African
workers, their access to higher occupational levels due to the growth of the skills scarcity in the 1960s, and
rising educational levels.
Table 2a: Real growth of wages of whites and Africans by industry/sector, 1945-93 (% p.a.)
Sector
Manufacturing
Race
1945-60
1960-72
1972-75
1975-80
1980-85
1985-93
Whites
3,05
3,35
0,92
1,16
0,08
-0,80
Africans
0,44
2,57
7,57
3,62
1,59
1,21
Construction
Whites
1,89
4,18
-1,63
1,42
-0,56
-2,68
Africans
0,07
3,38
6,07
-0,38
2,16
-2,67
Whites
2,35
2,48
4,44
-1,59
0,36
*
Mining
Africans
0,31
1,32
29,59
5,44
3,12
All races
1,57
1,51
15,74
2,51
1,65
1,17
Formal sector*
Whites
0,83
-0,79
1,79
Africans
10,47
3,29
2,88
All races
2,42
0,75
1,75
1.38
Non-primary
Whites
-0,74
1,22
-0,28
Sectors
Africans
2.85
2,28
3,12
All races
0,58
1,76
1,26
* The 1980-85 period is replaced by 1980-84 for the White and African groups as a racial breakdown was not provided
after 1984.
Source: Hofmeyr 1999, Table 2
Table 2b: Real growth of black wages and black: white wage gap by industry, 1960-94
Annual growth of real black wage:
1961-70
1971-80
1981-85
1985-94
Black wages as % of white levels:
1960
1970
1980
1985
1994
Source: Fallon 1992, SA Labour Statistics 1995
Mining
Manufacturing
Construction
0.72%
13.18%
-0.14%
..
2.69%
4.61%
0.81%
1.21%
2.96%
2.83%
1.15%
-0.29%
6%
5%
17%
19%
..
19%
17%
23%
25%
29%
18%
15%
19%
21%
30%
Econometric investigation confirm that higher levels of education and training amongst blacks, a decline in
wage discrimination and the rise of powerful black trade unions had all contributed to this rise in black wages
in the 1970s (Hofmeyr 1990). As Tables 3a and 3b illustrate, greater occupational mobility amongst African
workers was evident in the labour market. Hence, in all occupations from manager to semi-skilled manual
workers, African workers' representation improved from 1969 to 1977. Though definitional differences make
Tables 3a and 3b not strictly comparable, it is also clear that this major shift in the occupational distribution of
the African population has continued, as is evident by comparing, e.g., the 40% in elementary occupations in
1995 with the 71% in manual unskilled occupations in 1969 and the 62% in 1977.
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Table 3a: Share of white and African employment by occupation, 1969 & 1977
White 1969
White 1977
Managers
8.22%
Professional/semi-professional
10.11%
Clerical, white collar
42.74%
Supervisors
4.71%
Skilled manual
22.98%
Semi-skilled manual
8.68%
Unskilled manual
2.56%
Total economically active
100%
Due to rounding, figures may not all add up to exactly 100%
Source: Simkins & Hindson 1979
11.28%
11.52%
43.29%
5.24%
22.72%
4.91%
1.06%
100%
African 1969
0.39%
1.89%
6.29%
0.48%
2.86%
16.73%
71.37%
100%
African
1977
0.46%
2.53%
9.17%
1.15%
4.97%
19.67%
62.04%
100%
Table 3b: Share of white and African employment by occupation, 1995
Legislators, senior officials, managers
Professionals
Technicians, related professionals
Clerks
Services, shop & market sales
Skilled agriculture & fisheries
Craft, related trades
Plant, machine operators & assemblers
Armed forces
Elementary occupations
Occupation unspecified, unknown
Total economically active
Due to rounding, figures may not all add up to exactly 100%
Source: South Africa 1996a.
Whites
14.62%
8.41%
18.51%
22.52%
10.57%
3.58%
14.97%
3.84%
1.64%
0.17%
1.21%
100%
Africans
2.91%
2.00%
9.65%
7.84%
11.18%
0.65%
10.22%
14.04%
40.08%
0.22%
1.18%
100%
The anachronism of a racially divided labour market constructed by specific legislative interventions had thus
become clear from the 1970s onwards. The urgency of promoting economic growth dictated the need to
allow for occupational mobility and increased wages for black workers. In a sense, continued economic
stagnation provided proof of the limitations of racist labour market provisions. Thus the labour market began
to reveal a perceptible alteration from the rigid racial division of labour that had existed in the past.
Increasingly, the overlap between race and occupation was blurring.
3.6.2. A segmented labour market
What is clear from the above is that the numerous obstacles faced by black workers in the labour market
began to be eroded in this period. Hence black workers were given the right to organise in trade unions, real
wages rose rapidly and occupational mobility was evident. However, these positive developments were
counterpoised by growing unemployment in an environment of poor economic growth rates. The corollary of
South Africa's economic stagnation has been unemployment. Over the years this unemployment has come to
manifest as structural in nature. Rising unemployment was a result not only of inadequate economic growth
but also of the relative costs of capital and labour. Apart from union action, state policy also contributed to
making it cheaper to use capital. Such policies included negative real interest rates for a long period, tax
concessions on capital equipment and an overvalued exchange rate.
Between 1976 and 1990 the number of those without formal sector jobs increased by 32%. By 1994,
about half of the economically active population were unable to find formal sector employment. Indeed,
employment growth had remained below labour force growth for almost all of the past quarter of a century.
10
THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
Growing unemployment translates into a higher incidence of poverty and general social degradation amongst
the affected groups.
In order to better appreciate the effect of the poor performance of the economy on the composition of
employment and its impact on income distribution, it is useful to decompose the South African labour force
into three groups according to their access to the modern consumer economy:
•
Those employed in the core consumer economy, consisting of the dominant high-wage modern sectors
manufacturing, government service, and other industry and services. Mining is for present purposes not
included in this sector.
•
Those employed in the marginal modern sectors. In this group we include the two low-wage sectors of
commercial agriculture and domestic service, as well as mining. Although mining is not any longer a low
wage sector, many mining workers are only tenuously linked to the modern economy, as the dependants
of single migrants residing in mine compounds do not fully participate in modern consumer society.
•
The peripheral labour force, whose existence signifies substantial job scarcity in the formal sectors. In this
group we include subsistence agriculture, the informal sector, and the unemployed.
Many households, of course, have more than one earner, and earners may fall in different sectors.
Nevertheless, even for households this division is pertinent. The sharp wage rises for Africans in the modern
sectors since the early 1970s have sharply reduced poverty wages amongst most workers in the core modern
sectors and reduced poverty amongst households dependent on their earnings, though there is still much
poverty in households mainly dependent on the modern marginal sectors. Poverty in its most extreme form is
most widespread in the peripheral sectors, where most potential earners are jobless or under-employed.
Table 4: Decomposition of the labour force into sectors by access to modern consumer economy
1960
1970
1985
1994
Core economy
29%
46%
40%
35%
(manufacturing, government, other industry and services)
Modern marginal sectors
47%
32%
20%
15%
(commercial agricultural, domestic service, mining)
Peripheral labour force
24%
22%
40%
50%
(subsistence agriculture, informal sector, unemployed)
Source: Calculations based on: Van der Berg 1987; South African Labour Statistics (various years). Sadie’s relatively
high labour force estimates (Sadie 1991) were used, thus leading to a larger peripheral sector than observed by the
OHS1995.
By 1994, the core modern economy contained about 35% of the labour force, and the marginal modern
economy about 15%, thus leaving about half the labour force (liberally estimated) without formal
employment. As can be seen from Table 4, the share of the core is decreasing. Instead of expanding rapidly
so as to draw increasing proportions into the mainstream consumer society, employment in the core
economy is virtually stagnant. The only growing component in the last decades has been the public sector,
whilst all three components of the marginal modern economy are shrinking. The brunt of the increase in the
labour force thus falls upon the peripheral sectors, the unemployed, subsistence agriculture, and the informal
sector - precisely those sectors experiencing most poverty. Growth of employment in the core economy is
crucially affected by the overall growth rate in the economy, and the scope for a further reduction in poverty
is largely determined by the ability of the core economy to create more jobs.
3.7 Conclusion
This Section has shown how the history of the South African labour market was forged by the interaction
between political agendas and economic needs. As the economy developed, the state insisted on promoting
and protecting white workers at the expense of both black workers and longer term economic interests. This
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DPRU WORKING PAPER
contradiction was most starkly revealed in the period from the 1970s onwards, and only after one and a half
decades of abysmal economic performance did the state seek to break from the past. In doing so it
overturned the last vestiges of legislated racism in the labour market, strengthening market forces that had
already sharply reduced labour market discrimination despite the effects of legislation.
We shall now turn to trends in income inequality to show how labour market trends mapped onto
changes in society-wide inequality.
4. Trends in income inequality
4.1 Wages
Wage trends have largely already been discussed in Section 3 above, as part of the history of the South
African labour market. As became apparent, unequal job access was historically a major source of racial wage
inequality. Before its abolition, job reservation affected job access of generations of blacks and it will long
have a residual effect. Though job reservation no longer applies, unofficial discrimination and cultural barriers
still make it difficult for blacks to compete on an equal footing in the job market. Affirmative action policies
attempting to overcome the effect of these barriers, on the other hand, may become a new source of
inefficiency in the labour market.
The superior occupational profile of the white South African labour force when compared even to
industrial countries can be ascribed to white upward job mobility far beyond their capacity, especially in the
1970s. "The adjustment to the scarcity of (high-level manpower) has been a dilution of skill requirements" (Sadie
1982:28) (also refer again to Table 3). Job reservation and inadequate education and training of blacks
contributed greatly to artificially rapid white occupational mobility. Nevertheless, as discussed above, the
pattern of wage discrimination changed from the 1970s. Within a given job grade and standardising for
gender differentials, racial wage differentials have declined considerably since the mid-seventies, as shown in
Table 5, i.e. the "rate for the job" is increasingly applied (though this says nothing about differential access to
particular jobs). As early as 1989, African wages were barely 15 per cent lower than those of whites in a
similar job grade and of the same gender, a substantial reduction in discrimination since the 43 per cent
differential of 1976, and this had occurred before the apartheid era had formally come to an end. Using other
data sources, Moll (1998:1 & Table 10) came to a similar conclusion: total discrimination fell from 20% of the
African wage in 1980 to 12% in 1993.
Table 5: Relative wage levels by race for similar gender and job grade (% of white levels)
White
100%
1985
100%
1989
100%
Source: McGrath 1990:97
1976
Coloured
62.2%
78.8%
79.9%
Indian
67.0%
87.3%
89.4%
African
57.1%
78.2%
84.7%
4.2 Non-remuneration income
As indicated in Section 2, non-remuneration income consists of income from non-labour factors of production
(capital, land, entrepreneurship) and from transfers. As social security transfers are best discussed as part of
fiscal distribution, we shall confine ourselves in this section to a brief analysis of the other sources of income
mentioned. For convenience, we may think of such income as being returns to wealth (capital, land) and
returns to entrepreneurship.
Naturally, the poor are not able to accumulate wealth to the same extent as the rich, therefore wealth and thus by implication also the returns to wealth - is more concentrated than is income. This is readily
12
THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
apparent from the fact that wealth derives from postponed consumption, and the very poor can hardly
postpone consumption. This can be illustrated from the simple Keynesian consumption function of the form
C = Ca + cY
(eq.9)
where
C = consumption
Ca = autonomous consumption, i.e. that part of consumption that takes places even when there is
no income in the period concerned
c = the marginal propensity to consume, and
Y = income.
If income can be either consumed or saved, it follows that
S = -Ca + (1-c)Y
(eq.10)
where ........................................................................................................................................................................................ S = savings
If indeed autonomous savings are negative (–Ca), it follows that the average propensity to save (S/Y) rises
with the level of income. Thus it is not unexpected that wealth (accumulated savings) is more concentrated
than income.
The above analysis of course applies in the short term. In the long term, changes in income over time and
inter-generational transfers also become important. In South Africa, however, accumulation of assets was
hardly possible for the majority of the African population in the heyday of apartheid. Moreover, the one
important asset in African hands, communal land, was not marketable and did not generate much by way of
returns to wealth.
Economic theory is not yet able to tell us much about the origins and diffusion of entrepreneurship. What
is known, however, is that lack of education, of exposure to the modern consumer economy and modern
technology, and the lack of access to entrepreneurial credit (due inter alia to the fact that communal land
could not serve as collateral on loans) prevented Africans from participating in the modern economy as
entrepreneurs perhaps as much as did direct restrictions on business activity. The combined effect was to
leave African income from entrepreneurship at relatively low levels, despite more recent growth of the
informal sector. Similar, but somewhat less stringent constraints also inhibited coloured and Indian
entrepreneurial activity and accumulation of assets.
Thus non-remuneration income is more concentrated than income from remuneration, and is also likely to
follow rather than to lead racial shifts in the latter. For this reason, we shall largely confine our analysis to
remuneration income in this paper, and indeed for the rest of this research project. However, before leaving
the labour market to hold full sway as the major source of inequality of income and source of poverty in
South Africa, it is still necessary to provide a summary of the levels and trends of inter-group income inequality
and then to analyse that part of material control over resources which does not come through the market, i.e.
social spending, which is done in Section 5 on fiscal incidence.
4.3 Income inequality
Changing wage gaps do not in full measure lead to changes in the income gap, as wage income (the major
source of income) is the result of the interaction of wages and employment opportunities relative to
population. Whilst changing wage levels are important, other determinants of employment relative to
population also play a role in per capita incomes, such as changing age structure, labour force participation
rates, and the availability and distribution of employment. Table 6 shows estimates mainly based on various
surveys since 1917 of the per capita income of the different race groups. Due to the variety of
income/expenditure concepts used and the data deficiencies inherent in all the surveys, these figures should
not be interpreted too finely. In particular, the October Household Survey/Income and Expenditure Survey
(OHS/IES) of 1995 may have overestimated per capita African incomes through inadequately capturing some
of the poorest segments amongst Africans.
Nevertheless, despite these provisos, it is still possible to draw some broad conclusions as to movements
in per capita income from these data. In the first place, the mean per capita income of the poorest group –
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DPRU WORKING PAPER
Africans – reached the poverty line around 1970 and has doubled since, but even today many members of
this group are still in poverty, as will be discussed later. In the high-growth 1960s the African/white income
gap actually increased, because skills scarcity, exacerbated by the industrial colour bar, led to a premium
being paid on the wages of relatively skilled white workers. In the early 1970s, the shift in economic power
and to a lesser degree changing skill profiles narrowed the wage gap and thereby the income gap. Thereafter,
the impact on the income gap of the continued narrowing of the wage gap was partly counteracted by
growing unemployment amongst those with the least skills and education. 4 Economic growth best translates
into a reduction of the inter-group income gap when the racial wage gap narrows and there is sufficient
growth of employment.
Table 6: A compilation of estimates of per capita personal income by race group in 1995-Rand and relative to
white levels, 1917-1995
White
Coloured
Indian
African
Average
Per capita income in constant 1995-rand:
1917
R9 369
R2 061
R2 075
R849
R2 829
1924
R9 931
R1 986
R1 931
R788
R2 966
1936
R13 773
R2 151
R3 185
R1 048
R3 842
1946
R18 820
R3 068
R4 328
R1 671
R5 417
1956
R21 861
R3 698
R4 780
R1 883
R6 123
1959
R22 683
R3 568
R3 876
R1 746
R6 061
1960
R22 389
R3 568
R3 828
R1 815
R6 006
1970
R32 799
R5 684
R6 630
R2 246
R7 986
1975
R35 757
R6 945
R9 095
R3 075
R9 102
1980
R34 655
R6 623
R8 821
R2 931
R8 472
1987
R32 854
R6 862
R9 910
R2 781
R7 643
1993
R33 326
R6 445
R14 006
R3 637
R8 013
1995
R34 689
R6 931
R16 793
R4 678
R9 013
Relative per capita personal incomes (% of white level):
1917
100
22.0
22.1
9.1
1924
100
20.0
19.4
7.9
1936
100
15.6
23.1
7.6
1946
100
16.3
23.0
8.9
1956
100
16.9
21.9
8.6
1959
100
15.7
17.1
7.7
1960
100
15.9
17.1
8.1
1970
100
17.3
20.2
6.8
1975
100
19.4
25.4
8.6
1980
100
19.1
25.5
8.5
1987
100
20.9
30.2
8.5
1993
100
19.3
42.0
10.9
1995
100
20.0
48.4
13.5
Source: Own estimates based on McGrath 1983, official national accounts data, 1993 PSLSD, and 1995 OHS/IES.
The major recent distributional trends are the gradual narrowing of the African/white income gap concurrent
with the widening income gap among Africans, mainly due to differential access to formal employment. While
some benefited from a doubling of their real wages in the past two decades, unemployment, which affects
mainly the poorly educated, has also increased. Unemployment and therefore also income inequality have
strong geographic dimensions, with insiders being largely urban and outsiders rural. A strong rise in the
income of Indians has improved their position considerably, but due to their small numbers they play a minor
role in the broader picture of inequality in South Africa.
4
The narrowing income gap indicated by the last surveys may in part be the result of a better capturing of nonformal incomes in the two most recent surveys, and the already mentioned deficiencies of the 1995 OHS/IES.
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THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
5. Fiscal incidence and differential social spending
In South Africa, fiscal incidence studies have naturally focused on the racial incidence of taxation and more
particularly of public spending. Until recently blacks have paid a small portion of overall taxation and the focus
of fiscal incidence studies fell mainly on determining the extent of racial inequality in public expenditure
amongst race groups.
Fiscal incidence studies commonly depart from the notion of equity of the net gains and the losses from
public expenditure and taxation to gauge the political and policy priorities of a government. Our concern is
more specifically with equity in the post-fiscal distribution, i.e. with material outcomes of all economic
processes, of which the budget is but one, as a household's welfare in terms of command over goods and
services depends not only upon the personal incomes members earn, but also on the taxation and the
spending of government.
Just as shifting of the tax burden implies that the statutory incidence of taxation might be quite different
from the actual or economic incidence, public expenditure also can have unintended consequences, e.g.
means tested welfare transfers may affect decisions on labour force participation, consumption, household
formation (marriage), and perhaps sometimes even fertility. Most incidence studies really only consider the
static or statutory effects of the budget and not the dynamic effects or the effects of previous rounds of
taxation or spending. De Wulf (1975:75) warns against the impression of preciseness left by incidence studies
and points out that such estimates can at best be approximations.
Under apartheid, the division of service delivery into racially-based departments made it relatively easy to
determine the financial costs of the services provided for different race groups, though it was not possible to
determine how the benefits from a particular service differed among consumers in terms of where they are
located and the quality of the service provided. A particularly intractable problem in apartheid South Africa
was how to deal with wage differences amongst providers of services. As black teachers and health workers
were paid less than their white counterparts, financial costs exaggerated differentials in actual service
provision by race. No adjustment was made for this in the incidence studies discussed here.
5.1 Seventy years of fiscal incidence studies in South Africa
The first fiscal incidence study in South Africa dates back almost seventy years, when the Native Economics
Commission concluded that expenditures (both directly assignable to individuals, such as social services, and
an imputed value for non-assignable expenditures) of R8.3m to the benefit of Africans in 1929/30 well
exceeded the R6.6m they paid in taxes (South Africa 1932: 170-178).
In the 1950s the Tomlinson Commission (South Africa 1955), in drawing up the blueprint for the
homeland policy, concluded that in 1951 Africans benefited from social services of R50.3m plus a share of
R32.4m in non-assignable services. This contrasted with direct taxes of R4.0m and another R15.4m in other
taxes, leaving a net transfer of R63.3m to Africans through the budget (calculated from South Africa 1955:
38). If, however, only the contribution to secondary income is considered, from the total African income of
somewhat more than R400m, R4.0m of direct taxes was subtracted, and they received directly assignable
social services valued at R50.3m, leaving them about 11 per cent better off after the budget than before.
In 1971 Spandau showed that whites bore more than 90% of the direct tax burden in 1959/60, but that
racial gaps in per capita disposable income nevertheless remained large. Even then, inequality within the
African population was already startlingly large: the ratio between the per capita disposable income of African
urban and African rural inhabitants, at 4.7 : 1, was almost as large as that between white and African urban
dwellers (5.0 : 1).
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DPRU WORKING PAPER
Table 7: Personal income, direct taxes and disposable income by race, 1959/60
Whites
Africans
Personal income
R2 730.5m
R865.5
Minus: Direct taxes
R143.0m
R8.0m
Disposable income
R2 587.6m
R857.5m
Per capita disposable income:
Total
R838
R79
Urban
R848
R169
Rural
R788
R36
Source: Based on Spandau 1971: Vol.II, pp.146-7
Coloureds
R213.7
R1.7m
R212.1m
R141
R173
R71
Indians
R75.9m
R2.0m
R73.8m
R155
R173
R66
Total
R3 885.6m
R154.7m
R3 730.9m
R234
..
..
Leistner’s estimates spanning four decades supported the conclusion of the Tomlinson Commission that
African social expenditure benefits in the post-Second World War period far exceeded their contribution to
taxes, even including indirect taxes (Table 8). Note also, however, that this had not always been the case, and
that African social spending increased far more over the period covered by this table than other magnitudes
shown.
Table 8: Fiscal incidence for the African population, various years
1929/30
1946/7
1956/7
1964/5
Direct taxes
R3.0m
R4.5m
R7.6m
R9.5m
Indirect taxes
R3.5m
R8.9m
R14.9m
R28.5m
Total taxes
R6.5m
R13.4m
R22.5m
R38.0m
Admin spending*
R1.4m
R6.4m
R24.4m
R39.9m
Social spending
R2.5m
R22.6m
R78.6m
R146.2m
Capital expenditures
R0.4m
R1.4m
R22.2m
R29.1m
Total expenditures
R4.3m
R30.4m
R125.2m
R215.2m
* This presumably refers only to "African administration", i.e. of the former homelands and townships and of the
departments dealing with Africans
Source: Leistner 1968: p.175
In the 1970s, the Theron Commission on the socio-political position of the coloured population concluded
that coloureds benefited substantially from budgetary redistribution (South Africa 1976: 56). Terreblanche
(1978: Tables 1-7 & appendix) supplemented and updated these figures and pointed to a major shift favouring
coloureds in the 1970s, mainly as a result of a dramatic expansion of social spending.
McGrath (1983) utilised survey data along with census results for his income distribution estimates, though
his expenditure incidence estimates were mainly based on data obtained from the expenditure authorities.
Apartheid bookkeeping allowed most expenditures on education, health, housing and welfare, and even food
subsidies to be allocated to individuals by race. McGrath combined this with various assumptions about nonassignable expenditures and concluded that Africans gained under all sets of assumptions and that
redistribution from whites increased under all but the most restrictive assumptions. Nevertheless, a massive
post-budget racial gap remained in command over resources.
Bromberger (1982) considered shifts in the underlying policies to derive conclusions on the evolution of
government’s distributional stance. Pertinent to this paper is his view that the retrogression in distributive
policies after the National Party came to power in 1948 was reduced in the 1960s, when there were already
“signs of a thaw”, and particularly since 1972, which witnessed "a trend towards re-incorporation and reduced
inequality".
Van der Berg (1989) contrasted the apartheid norm for public expenditure (tax shares) with the unitary
society norm (equity, approximated by population shares) and showed that actual expenditures lay
somewhere between these two norms. He also showed (Van der Berg 1992a & 1992b) that the per capita
social expenditure gap was so large that it would have been fiscally impossible to achieve parity at white
benefit levels; in 1986 white benefit levels would have had to be reduced to about one-third their actual level
16
THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
to achieve parity within the constraints of the budget. An IMF study (Lachman and Bercuson 1992) arrived at
a similar conclusion and also made a strong case for policies supportive of accelerated growth to enhance
fiscal resources, as available resources could not meet expectations in a simple static redistributive exercise.
Janish (1996) replicated McGrath’s earlier work, but determined social service utilisation from the 1993
Living Standards and Development Survey (PSLSD), and applied unit costs by race and/or region from public
expenditure data to these. Her results showed that the 1993 budget was much more redistributory to blacks
than the budgets covered by McGrath, indicating significant shifts in social spending towards blacks over the
last two decades of apartheid.
5.2 Trends in expenditure incidence
Combining some of the foregoing studies, it is possible to deduce broad patterns of social expenditure for
various years after World War II. The results, summarised in Table 9, show that the narrowing gap was made
possible partly by reduced white benefit levels after 1975. The remaining gap is accounted for not so much by
differential benefit levels as by differential access to services.
Table 9: Estimates of real per capita social spending by race group in 1990-Rand, 1949-1993 (in 1990-Rand)
White
Black
Coloured
Indian
All groups
1949
R 978
R 120
R 413
R 348
R 315
1959
R1 250
R 152
R 511
R 457
R 391
1969
R1 511
R 163
R 598
R 696
R 450
1975
R2 033
R 239
R 804
R 891
R 607
1986
R1 792
R 375
R 969
R1 127
R 647
1990
R1 856
R 513
R1 074
R1 309
R 761
1993
R1 475
R 751
R1 022
R1 488
R1 062
Source: Own estimates based on McGrath 1983, Van der Berg 1992a & 1992b, Lachman & Bercuson 1994, and
Janisch 1996
As a result of these shifts, African social expenditure per capita, stagnant at about 12% of white levels till
1975, increased to 51% by 1993. Together with rapidly rising social expenditure ratios, this meant that real
social spending for Africans grew at 6.5% per annum from 1975 to 1993, in a period of sluggish economic
growth and before apartheid had been officially abandoned. Thus when the new government assumed power
in 1994, this trend of reducing racial disparities in social expenditure was already well established, even
though the disparities were still large.
In education, half the social budget, educational spending on Africans, starting from a low base, increased
remarkably as more children entered schools, those in school remained there longer, and expenditures per
pupil rose. As recently as 1982 spending on African education was less than half that on whites; five years
later it had surpassed that on whites for the first time. If educational expenditure is expressed per potential
student at all levels of education, taken to be the population aged 5-24, expenditure on Africans stood at 4%
of that on whites in 1975, but increased substantially to 18% by 1991 (De Villiers 1996). This still left a very
large gap, not all of it due to continued discrimination in education provision. To a large degree it also
reflected past backlogs, which had prevented many blacks from reaching higher levels of education. But for
the new government, it still leaves a considerable fiscal challenge to eliminate these backlogs.
5.3 The redistributory impact of the budget
All studies reviewed agree that the budget has been an instrument of limited redistribution to Africans at least
from the late 1920s. The high degree of income inequality amongst races led to whites paying by far the
largest share of taxes. Even under apartheid, part of these taxes was used to provide services to Africans. Thus
post-fiscal distribution by race has long been more equal than the primary distribution of income, even though
17
DPRU WORKING PAPER
the patterns of expenditure were still highly discriminatory and large post-budget racial welfare differentials
remained.
Surprisingly, racial redistribution through the budget actually increased even during the apartheid years.
Fiscal redistribution before the 1930s seems to have been negligible or even regressive across races, but since
then rising social spending on Africans had ensured greater redistribution through the budget. This
accelerated particularly during the 1970s, with the growing needs of integration into a single economy.
Limited scope remains to use the budget to meet the high expectations of the newly enfranchised poor.
The major fiscal challenge now is to improve the efficiency of public resource use so as to enhance the quality
of and access to services. Redistribution, on the other hand, will increasingly have to occur in terms of primary
or personal incomes; a pre-condition for this is the creation of employment to draw the poor into the
economic mainstream.
Table 10 shows the effect of budgetary redistribution on welfare by race group in 1993. Before the
redistributive effect of the budget is considered, per capita income of Africans (excluding social pensions,
which are part of social spending) was only 10.3% of white levels. After the budget, African secondary
income per capita was 15.6% of white levels, due to a net gain from fiscal incidence of R895 per African
person and a net loss of R3 421 per white person - more than African per capita income before the budget.
Thus even though the budget redistributed considerably, the racial post-budget gap remained extremely large.
The scope for further redistribution through the budget is rather limited. The government’s macroeconomic strategy, GEAR (Growth, Employment and Redistribution), acknowledges that taxation is already too
high; if anything, taxes on the middle income group, including most whites, may be reduced to eliminate the
effect of past fiscal drag in an inflationary environment. Political resistance by the affluent, limited capacity to
deliver especially rural services by government, and the fact that unequal access to higher levels of education
cannot be overcome overnight make parity in social spending per capita at best a distant goal. But even this
would have a limited effect, as Table 10 shows: African post-budget command over goods and services, i.e.
secondary incomes, would then still have been only 17% of white levels. This emphasises the limits to the
budget as instrument of redistribution and points to the importance of the distribution of pre-budgetary or
primary income. This is a key finding that reinforces our earlier conclusion that the labour market must take
centre stage, as is indeed the case in this research project.
Table 10: Racial redistribution through the budget, 1993, and limits to such redistribution
White
African
Coloured
Indian
Average
Income per capita
(excl. social pension)
R26 850
R2 758
R5 088
R10 921
R6 305
% of white level
100.0%
10.3%
18.9%
40.7%
23.5%
Minus: Income tax per capita
R5 546
R187
R500
R1 320
R941
Disposable income per capita
R21 304
R2 571
R4 588
R9 601
R5 364
Plus: Social spending per capita
R2 125
R1 082
R1 473
R2 144
R1 278
Secondary income per capita:
Actual 1993
R23 429
R3 653
R6 061
R11 745
R6 642
% of white level
100.0%
15.6%
25.9%
50.1%
28.3%
Assuming equal social
spending of R1 278 p.c.
R22 582
R3 849
R5 866
R10 879
R6 642
% of white level
100.0%
17.0%
26.0%
48.2%
29.4%
Per capita effect of budget:
Actual 1993
-R3 421
R895
R973
R824
R337
Assuming equal social
spending of R1 278 p.c.
-R4 268
R1 091
R778
-R42
R337
Scope for redistribution
-R847
+R196
-R195
-R966
R0
Source: Own recalculations based on Janisch (1996).
18
THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
6. The Current Economic Policy Environment in South Africa
One of the consequences of such inequality in a developing country context is also endemic poverty. Four
well-known investigations have been undertaken into aspects of South African poverty. The Carnegie
Investigation considered the poor-white problem in the 1930s (cf. Le Roux 1978); the Tomlinson Commission
looked at the economic situation within what later became known as the homelands in the 1950s; in the
1970s the Theron Commission investigated poverty amongst coloured people (cf. Terreblanche 1976); and
the Second Carnegie Inquiry into Poverty and Development in the early 1980s looked at particularly African
poverty (Wilson & Ramphele 1990). The Tomlinson Commission was unique in that its brief was to investigate
ways of improving the economic situation within particular areas; for this reason, it is not fully comparable
with the other investigations, as industrial decentralisation, for instance, played a large role in its findings. The
other three investigations had some common features: they all saw an active role for the state in redressing
poverty; all placed particular emphasis on education; and all perceived employment creation as necessary,
but not sufficient unless accompanied by social upliftment on a large scale and over a substantial time period.
But crucially, all three reports and the debate flowing from them emphasised the importance of political
structures which would ensure that the problem of poverty cannot be ignored.
The (First) Carnegie Report’s recommendations were largely put into effect, and white poverty was largely
eliminated within a generation. The state in the process reduced economic disparities between Afrikaners and
English-speaking whites. Poverty amongst coloureds has also been addressed with some (although more
limited) success in the quarter century since the Theron Commission. The Second Carnegie Inquiry had no
direct impact on policy as it had no official standing. As African poverty is far more intractable than poverty
amongst other groups, and the fiscal constraint on addressing such poverty is far more severe, one would
expect the results of attention to African poverty to be less dramatic in anything but the long term.
In 1996, the government accepted a new macro-economic strategy, known as GEAR (Growth,
Employment and Redistribution). It saw substantial long term economic growth rates as achievable, given
improvements in education, the freeing of international trade, and possible long term capital flows to South
Africa in the absence of apartheid. GEAR aimed at building a bridge towards such long term growth by
establishing a medium term growth record that would attract foreign investors and raise the balance of
payments constraint. To that end, it essentially involved an export-led policy, stimulated by the real exchange
rate decline of early 1996. This was regarded as an opportunity to stimulate exports, if the inflationary
consequences of depreciation could be staved off by anti-inflationary policies, including fiscal restraint,
continued tight monetary policies, and wage restraint. All three these aspects, but particularly the last, were
opposed by the ANC’s allies in the trade unions and the South African Communist Party.
A series of labour reforms introduced since the ANC came to power in 1994 received support from
organised workers, but were perceived in the investor community as being in conflict with the spirit of GEAR
because of the increased labour market regulation they embodied. These reforms included the Labour
Relations Act (LRA) of 1995, the Basic Conditions of Employment Act of 1997, he Employment Equity Act of
1998, and the Skills Development Bill, still not passed by Parliament.
In 1998, a Poverty and Inequality Report (PIR), a study undertaken by a number of researchers on behalf
of government, was made public. Its impact on policy has been limited, but that it was undertaken at all
shows government’s growing concern with poverty and unemployment. This concern also led to a Job
Summit at the end of 1998 between government, organised labour and the business sector. The major
consensus issue to emerge from this was on occupational training and the need for job creation schemes, but
details remained vague. Government also used this opportunity to reiterate its position on GEAR as the
central part of its economic strategy. This was seen as an indication that the government was becoming
impatient with the labour movement and was willing to reconsider some of its labour policies for fear that
they were inimical to employment creation.
19
DPRU WORKING PAPER
7. Contemporary household poverty and the labour market
The concern with poverty reflected in policy developments of recent years relates to the fact that poverty has
not declined with the eradication of discrimination in the labour market, as will become clear in this Section.
This Section provides a brief overview of the present situation regarding poverty, material welfare and
inequality in households and of inequality in the labour market, mainly at the racial level, although the role of
other markers of inequality such as gender, location, occupation, and formal/informal status will also be
discussed. This will serve as an introduction to other parts of this research project, which will go into further
detail on these topics, and also provides a current perspective against which to judge the historical trends
discussed earlier.
7.1 Racial distribution of material welfare
Table 11 presents a few differentials in living standards and privilege between races in South Africa in
summary form. The fullest measure of economic and social inequality is the estimated differential of 13 years
in average life expectancy at birth between whites and Africans, a measure sensitive to nutrition, health,
education, sanitation, and housing conditions and that thus goes beyond the usual income poverty measures.
Table 11: Some measures of racial inequality in the 1990s
White
African
Per capita income
1995
R34 689
R2 717
% of households poor
1995
0.4%
38.8%
Monthly non-agric. wage
Dec1997
R7 243
R2 711
Broad unemployment
1995
35%
4%
Social spending per capita
1993
R2 125
R1 082
% matriculated (age 25+)
1995
68%
19%
Life expectancy at birth
1991
73
60
Sources: Other tables in this paper; Central Statistical Service
Coloured
R6 931
19.0%
R3 053
21%
R1 473
18%
66
Indian
R16 793
2.3%
R4 300
12%
R2 144
44%
69
Total
R7 062
28.4%
R4 121
27%
R1 530
28%
63
Table 12 shows the economic position of the different quintiles of the household income distribution in 1993.
Although household poverty is not purely a labour market phenomenon, and the mapping of earners onto
households is inherently difficult (many households, for instance, have earners involved in different sectors or
in different occupations), it has clearly been shown above that the labour market is a crucial element in
household poverty in South Africa.
A broad picture emerges of an affluent top quintile being joined by increasing numbers of Africans (a
process that undoubtedly accelerated after democratisation); a second quintile that is mainly African, earners
being relatively well-established in mainly urban jobs, economically relatively secure, and strongly upwardly
mobile; a third quintile whose economic position is tenuous as earners depend on highly uncertain jobs and
have limited social security coverage; and two bottom quintiles who are poor, largely rural and excluded from
most of the benefits of the modern consumer economy and labour market. For the bottom 60% of
households, the state's transfer payments are crucial, as social assistance to the old and the disabled has come
to play a unique role in South African poverty alleviation. But in other areas, the social spending shifts of the
past two decades resulted in a trend to service provision to the top quintiles of all race groups. For instance,
the table shows that in 1993 the better educated were mainly concentrated in the top two quintiles, while
secondary and tertiary educational enrolment was also concentrated in these quintiles. The bottom three
quintiles, which included many children, had extremely poor access to secondary and tertiary education. Thus
20
THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
the income classes were recreating themselves. But the major difference between the bottom quintiles and
the rest was access to very scarce remunerative employment.5
Table 12: Socio-economic situation of different income classes, 1993*
Income quintiles
Total
Q1
Q2
Q3
Q4
Q5:
Per capita income
R390
R1 056
R1 974
R4 158
R20 478
R5 611
Household income
R2 406
R6 372
R11 550
R22 458
R82 536
R30 630
Remittances as % of income
27%
14%
6%
2%
1%
3%
Regular wage as % of income
23%
44%
67%
79%
65%
65%
Unemployment
53%
43%
30%
17%
4%
30%
No education**
24%
18%
13%
7%
6%
15%
Less than full primary educ.**
54%
42%
33%
21%
9%
35%
Completed secondary educ.**
4%
8%
13%
23%
62%
19%
Completed tertiary educ.**
0%
0%
0.2%
0.6%
10.3%
1.8%
Primary net enrolment
85%
87%
88%
89%
90%
87%
Secondary net enrolment
46%
57%
67%
78%
83%
60%
Tertiary net enrolment
4%
5%
8%
20%
38%
11%
Households rural
76%
68%
46%
33%
15%
47%
Households metropolitan
10%
14%
29%
40%
58%
30%
Households African
96%
93%
82%
68%
25%
73%
Households white
1%
1%
3%
16%
66%
17%
Household size
6.3
6.0
5.9
5.4
4.2
5.5
Shacks/traditional dwellings
39%
32%
25%
15%
2%
23%
Electricity in home
15%
28%
49%
77%
98%
53%
Stunting of children under 5
38%
27%
23%
18%
6%
27%
*
Figures are taken from different sources that are not necessarily fully comparable across different dimensions, as the criteria for
the division into quintiles were not always the same (e.g. income or consumption group, quintile of households or of individuals,
etc.)
**
Education level obtained calculated only for population 16 years and older
Sources: Compiled from World Bank/RDP 1995; Saldru 1994; Janisch 1996; Klasen 1996.
7.2 Household poverty
Table 13 below employs a household poverty line of R903 per month to determine the incidence of poverty.
A first, basic national poverty measure is provided in column 4, where the incidence of poverty for all
households is 28.4%. This is simply a headcount index, measuring the number of households earning less than
the poverty line. There is a disproportionately high incidence of poverty amongst African households (39%)
and to a lesser extent amongst coloureds (19%) compared with Asian and White households.
Close to half (48%) of rural households earn a monthly income below the poverty line, but the
corresponding figure for urban areas is only 13%. Poverty is most endemic in the Eastern Cape, Free State
and Northern Province, while the lowest incidence of household poverty is in Gauteng and the Western
Cape. While Kwazulu-Natal has a relatively low poverty incidence, its large population size means that it
houses a large proportion (17%) of the poor. 6
5
For a fuller treatment of poverty, social security and social service provision in the post-apartheid period, cf.
World Bank/RDP (1995), Klasen (1996), Bhorat & Leibbrandt (1996), Lundahl & Moritz (1994), Leibbrandt et al.
(1996), Saldru (1994), South Africa (1996), Kruger (1992), Lund (1993), Van der Berg (1997), Case & Deaton
(1996), Whiteford et al. (1995), Whiteford & McGrath (1994), Donaldson (1992 & 1993), and PIR 1998. A
historical perspective is best gained from Bromberger (1984), Iliffe (1987), Kruger (1992), and Wilson &
Ramphele (1985).
6
The slightly lower poverty figures for the Northern Province compared to those reported when using the 1993
data from the Living Standards and Development Survey suggest an overstatement of poverty in this province in
the past (Leibbrandt & Woolard 1999).
21
DPRU WORKING PAPER
Table 13: A profile of household poverty, 1995
% of all
households
(1)
All Households
Race
African
Coloured
Asian
White
Location
Urban
Rural
Province
Western Cape
Eastern Cape
Northern Cape
Free State
Kwazulu/Natal
North-West
Gauteng
Mpumalanga
Northern Province
Household size
1
2
3
4
5
6
7
8
9
10+
No. of Children under 16
0
1
2
3
4
5
6+
Average Age of Adults
16-24
25-29
% of poor
households
(2)
% of non-poor Incidence of
households
poverty (5)
(3)
100.0%
Relative
incidence of
poverty
(2)/(1)
(4)
(5)
28.4%
68.7%
8.6%
2.8%
19.9%
93.7%
5.8%
0.2%
0.3%
58.7%
9.8%
3.9%
27.6%
38.8%
19.0%
2.3%
0.4%
1.37
0.67
0.08
0.01
56.2%
43.8%
26.5%
73.5%
68.0%
32.0%
13.4%
47.7%
0.47
1.68
10.9%
14.9%
2.1%
8.1%
18.0%
8.6%
19.8%
6.3%
11.2%
3.9%
25.8%
2.3%
12.1%
16.7%
10.8%
4.4%
8.4%
15.7%
13.6%
10.5%
2.1%
6.5%
18.6%
7.8%
26.0%
5.5%
9.4%
10.3%
49.3%
30.0%
42.4%
26.3%
35.5%
6.3%
37.5%
39.9%
0.36
1.73
1.06
1.49
0.93
1.25
0.22
1.32
1.40
12.9%
15.4%
14.2%
17.8%
13.6%
9.9%
6.3%
4.0%
2.7%
3.2%
2.2%
7.9%
11.2%
16.6%
16.3%
15.0%
10.9%
7.6%
5.5%
6.7%
17.1%
18.3%
15.4%
18.3%
12.6%
7.8%
4.4%
2.6%
1.6%
1.8%
4.9%
14.6%
22.4%
26.5%
34.0%
43.4%
49.6%
53.6%
57.3%
59.4%
0.17
0.51
0.79
0.93
1.20
1.53
1.75
1.89
2.02
2.09
38.5%
19.3%
19.2%
12.0%
6.6%
2.9%
1.5%
19.3%
19.5%
21.4%
17.6%
12.4%
6.2%
3.6%
46.1%
19.3%
18.4%
9.8%
4.3%
1.5%
0.6%
14.2%
28.7%
31.6%
41.7%
53.3%
61.4%
70.2%
0.50
1.01
1.11
1.47
1.88
2.16
2.47
4.3%
14.5%
5.3%
15.4%
4.0%
14.2%
34.4%
30.2%
1.21
1.06
22
THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
30-40
44.0%
Over 40
37.2%
Average Years of Education of Adults
0-3
11.6%
4-7
27.9%
8-11
39.0%
12
11.4%
12+
9.8%
45.1%
34.2%
43.5%
38.4%
29.2%
26.2%
1.03
0.92
20.6%
48.3%
29.7%
0.9%
0.1%
8.0%
19.8%
42.7%
15.5%
13.7%
50.6%
49.2%
21.6%
2.1%
0.3%
1.78
1.73
0.76
0.08
0.01
59.7%
40.3%
76.9%
23.1%
23.6%
40.9%
0.83
1.44
28.4%
43.4%
23.2%
5.0%
52.2%
33.4%
12.4%
2.0%
19.0%
47.4%
27.5%
6.2%
52.2%
21.9%
15.2%
11.6%
1.84
0.77
0.53
0.41
57.2%
2.7%
10.8%
29.3%
31.3%
2.1%
12.7%
53.9%
67.5%
3.0%
10.0%
19.5%
15.5%
22.4%
33.5%
52.3%
0.55
0.79
1.18
1.84
Male Head or Married Male Present
Yes
72.0%
No
28.0%
Number of Earners
0
1
2
3
Unemployment Rate of Adults
0% to 25%
25% to 50%
50% to 75%
75% to 100%
Source: Own calculations from OHS/IES95
Household size clearly is related to poverty where the latter is defined in per capita terms. Households with
fewer than five members have a smaller share of the poor than of the overall population, while larger
households are more likely to be poor. This is supported by the data that show that the incidence of poverty
rises with the number of children.
Poverty is more concentrated in households where the average adult age within households is below 24
years (adults being defined here as 16 years or older), 34% of such households being poor. This may in part
reflect a labour market life cycle phenomenon: younger households have lower levels of experience and
fewer years of schooling, and therefore earn less, or are less likely to be in employment. Fortunately, though,
such households are also usually smaller, thus their population share may also be smaller.
In more than two-thirds of poor households, average adult education levels are below secondary level (i.e.
less than 8 years of education). Secondary schooling, especially when completed, is apparently able to pull
households above the poverty line, as the incidence of poverty among households where adults have
matriculated is only 2.1%, and amongst those with even higher education it is only 0.3%. The relative
incidence of poverty (last column) indicates that the dividing line in terms of education and household
poverty is the attainment or non-attainment of at least secondary education.
The presence of a married male or male head in the household would appear to be an important
predictor of poverty. Hence, amongst the 28% of all households with no male head or married male present,
the incidence of poverty is 41%, as against only 24% in all other households. This should be seen against the
perspective of widespread male absence from rural areas due to migrant work
As would be expected, the addition of one more earner (employed or self-employed) in a household
reduces the likelihood of living in poverty. Thus while households with no earners are 28% of all households,
they constitute more than half of poor households. Note that the largest drop in poverty incidence occurs
upon the provision of one job to a household with no earners. Even among households with one earner there
are still many (22%) in poverty, though, i.e. the level of income earned from employment or self-employment
is still insufficient to lift these households out of poverty. Thus the quality of employment is also important.
23
DPRU WORKING PAPER
The final rows of the table show that, where less than one-quarter of adults are unemployed in a
household, the poverty incidence is particularly low (16%). At higher household unemployment rates, poverty
becomes more pervasive.
7.3. A labour market snapshot
Table 14, loosely based on Fallon & Lucas (1996) though using a different data set, presents a broad snapshot
of the South African labour market. A slight majority of the total population of working age of 23.9 million is
female. Looking first at male workers, a greater share of white (78%) than African (47%) male workers is in
employment. Across all race groups, formal employment (designated as ‘employee’) dominates as the main
form of work activity. The share of African working-age males in unemployment is 18%, with coloured males
not far better off with 13%, much higher than the 2% of white male workers. (Note that these figures refer to
broad unemployment, and are expressed relative to the total population of working age rather than to the
labour force. They thus differ from unemployment rates, which are discussed later.) The primary reason for
males being economically inactive (out of the labour force) is enrolment in education. The exceptionally high
figure for African males of 24% in part reflects the long duration and poor efficiency (in terms of pass-rates) of
the education system.
Gender differences in the labour market are stark. While 43% of all African males of working age are
formal employees, only 17% of African females are in the same position. There are three different
explanations for this. Firstly, more African females than African males are in self-employment or domestic
service. Secondly, the share of African females in unemployment is also higher. Thirdly, a larger proportion of
African females are out of the labour force, the majority being enrolled in education or involved in household
duties. It is interesting to note that the education figures are more differentiated according to race than
gender.
Amongst female workers, there are also racial differences. While only 17% of African females are in formal
employment, 45% of white females and 36% of coloured females have formal jobs. Amongst Asians, the
relatively low figure of 30% is accounted for by a large proportion (34%) being outside the labour force
through involvement in household duties. Note also that 8% of coloured women are in unregistered selfemployment, reflecting also their involvement in domestic services. But African women are the least likely
amongst all workers to have employment.
24
THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
Table 14: Employment status of adults (age 16+) by race and gender, 1995
Population 16 years or older
Employees*
Registered self-employed
Unregistered self-employed
Employees and self-employed (hybrid)
African
8 424 476
43%
0%
2%
Males
White
Coloured
1 796 299
1 098 972
63%
60%
11%
1%
2%
2%
1%
2%
Total employed
47%
78%
Unemployed & searching
9%
2%
Unemployed & not searching
9%
0%
Total unemployed
18%
2%
Enrolled in education
24%
10%
Keeping house
0%
0%
Retired
3%
8%
Disabled
3%
2%
Other
6%
1%
Total out of labour force
36%
20%
Unemployment rate (% of Labour Force):
Broad
28%
3%
Narrow
13%
2%
* Domestic workers not included with employees, but with self-employed
Totals do not all add up to 100% due to rounding
Source: Own calculations from OHS95
Females
White
Coloured
1 748 318
1 161 714
45%
36%
3%
0%
2%
8%
Asian
343 145
59%
8%
5%
African
9 016 475
17%
0%
8%
1%
64%
10%
4%
13%
11%
0%
3%
7%
3%
24%
1%
73%
6%
1%
7%
11%
0%
3%
3%
2%
20%
1%
26%
9%
12%
21%
22%
13%
5%
2%
11%
53%
1%
52%
2%
1%
3%
9%
21%
8%
1%
6%
45%
17%
12%
9%
8%
45%
19%
6%
4%
25
Total
Asian
352 004
30%
1%
2%
23 941 403
35%
1%
5%
0%
44%
9%
6%
15%
9%
16%
4%
4%
8%
41%
0%
34%
5%
3%
7%
11%
34%
4%
3%
7%
59%
1%
43%
8%
8%
16%
20%
8%
4%
3%
7%
42%
26%
16%
18%
11%
27%
13%
DPRU WORKING PAPER
Unemployment rates are presented at the bottom of the table, according to both the strict and expanded
definitions. Race and gender are very important determinants of unemployment. African unemployment rates
are higher than for all other race groups, while the coloured unemployment rates are also fairly high. The
gender effect is strong among all race groups, female broad unemployment levels being almost double that of
their male counterparts. Differentials are smaller (though still large) when the narrow unemployment rate is
considered, indicative of the preponderance of women among discouraged work seekers.
8. Conclusion
This paper has shown that poverty and inequality are still widespread in South Africa, and that it mainly has its
origins in the labour market. Solutions to these problems would also have to be found in the labour market.
An understanding of labour market outcomes is thus essential for understanding contemporary household
poverty in South Africa. This, in turn, cannot be done in isolation from the historical forces that have shaped
the South African labour market, as discussed in this paper. Poverty and inequality in the present are very
much the legacy of South Africa’s discriminatory past.
This paper serves as an introduction to the wider research project on poverty and the labour market in
South Africa. The rest of this research project will provide a detailed analysis of contemporary poverty and
inequality dynamics within households and within the labour market. The final research report will then
combine this contemporary analysis with the historical backdrop in order to arrive at some policy conclusions.
26
THE PRESENT AS A LEGACY OF THE PAST: THE LABOUR MARKET, INEQUALITY AND POVERTY IN SA
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